Sebi proposes Aadhaar-based identification for investors

Cases probed by regulator shoot up 84% to 245

The Securities and Exchange Board of India (Sebi) is planning identification of stock market investors through their Aadhaar numbers. In its annual report for 2016-17 released on Monday, Chairman Ajay Tyagi said “Sebi will continue to strengthen market supervision through various steps such as Aadhaar-based identification of investors, effective market surveillance and monitoring of compliances by regulated entities.”
 

The move is in line with the government agenda of making Aadhaar mandatory for opening bank accounts, filing tax returns as well as for any financial transaction of ~50,000 and above. The government in Budget 2017-18 has already mandated linking of the Aadhaar number with the Permanent Account Number (PAN) to avoid creation of multiple accounts for evasion of taxes.
 

In the annual report, Sebi said it was working on linking Aadhaar with individual demat accounts. 
 

“Sebi will try to enhance market integrity delisting of suspended/inactive listed companies, linking of individual demat accounts with Aadhaar and further strengthening the framework for market surveillance,” the markets regulator said in its annual report. 
 

Sebi believes the usage of Aadhaar in the financial market would boost investor confidence. “Aadhaar-linked public policy initiatives, return to a normal monsoon rainfall, and reduced external vulnerabilities were vital for institutional investors’ confidence in the India growth story and also in its markets,” it said.
 

The report also noted that in FY17 as many as 245 new cases were taken up for investigation compared to 133 fresh ones in FY16, a jump of 84 per cent. Besides, the regulator completed probes into 155 matters in FY17, compared with 123 in FY16.
 

“There was a comparative increase in the number of cases taken up during 2016-17, mainly due to the references received from the Department of Income Tax in the matter of long-term capital gain and short term capital loss in various scrips,” the regulator noted.
 

In FY17, 76 per cent (185 of 245) of the cases taken up for investigation pertained to market manipulation and price rigging. Also, insider trading and takeover violation cases accounted for 14 per cent and one per cent, respectively.
 

"Since several investigation cases involve multiple allegations of violations, their water-tight classification under a specific category becomes difficult. Therefore, cases were classified on the basis of main charge and violation," Sebi said.
 

Tyagi also indicated tweaking the existing framework. “The securities market is dynamic and its regulatory framework needs to evolve in tandem with this. Sebi will continue to rationalise the regulatory framework to make it contemporary and user-friendly, without compromising on its over-arching objective of investor protection,” he said. 
 

He also said integration of the commodities markets would remain his priority for the current year. “Sebi will take necessary measures for the integration and harmonious development of the commodity derivatives market with the securities market and will explore widening its participants and products to further deepen the commodity derivatives segment,” he said.